The perils of failing to ask for a VAT invoice
There was a company that was making a good profit by sourcing desirable consumer items like tablet computers, smartphones, etc. that were in short supply. It was unable to get these products by buying from the suppliers because there was such high demand for them that supplies were limited. Most retailers were only allowing customers to buy two of these products each.
The company was sending its staff to the retailers to buy the items two at a time. Each item generally cost several hundred pounds. Buying two was certainly more than £250.00. What’s so important about £250.00? I’ll tell you in a moment. So, the company’s staff returned with their purchases and the company was able to meet the demands of overseas customers who were unable, at that time, able to buy the products in their home countries.
Are you still with me?
The sale of the items the company had bought was outside the scope of UK VAT because the goods were exported. The company had full evidence of the export so the VAT man was happy that there was no VAT to account for on the sale.
Remember that £250.00 I mentioned earlier? Well, there’s a VAT rule that says that where the amount paid is no more than £250.00 including VAT the retailer can issue a less detailed VAT invoice. Less detailed VAT invoices contain significantly less information than a full VAT invoice. In particular the name and address of the customer is one item that is missing from them. The VAT man noticed that the company had lots of these less detailed VAT invoices where the value of the supply was over the £250.00 limit. The VAT man has assessed the company for the VAT it had claimed against these invoices.
So the moral of this tale? Remember to get full VAT invoices for purchases where you are paying more than £250.00 if you want to be able to recover the VAT on your next VAT return.
Got a view on this? Leave a comment below.
Need help with a VAT issue? Give me a call on 01293 734545.
HMRC targeting businesses that trade above the VAT registration limit
HMRC has published a press release in which it has announced a compaign to target businesses that have turnover above the registration limit which have failed to register for VAT. HMRC will use information to which it already has access, e.g. direct tax data, to assist in its search for such businesses, as well as other means.
HMRC intends to invite such businesses to voluntarily register during the campaign and is likely to offer a reduced penalty over that usually applied for late registration. For late registration the penalty is a percentage of the amount of VAT due from the date from which registration started to the date on which HMRC was notified. The longer the delay the higher the penalty. Although the penalty might be reduced there is no guarantee, and it is still likely to be on a sliding scale.
If you are trading above the registration limit and have yet to register for VAT, you need to take action sooner rather than later because the longer you wait the bigger the penalty you will have to pay.
For more information on registration limits visit my VAT Registration Limits page.
If you need help deciding whether you must register for VAT, ask your accountant or find a local VAT specialist to advise you.
Got any views on this? Leave a comment below.
Evading VAT on cars brought into the UK
It seems that there are some people who are avoiding paying VAT on vehicles they bring into the UK. The issue only affects vehicles that are brought into the UK permanently. Vehicles that are in the UK temporarily have no need to be registered with the DVLA and any VAT due paid to HMRC.
Under the current system it is possible for vehicles to be registered with the DVLA without paying any VAT due to HMRC. This is to be addressed in a joint initiative between HMRC and the DVLA which will result in a new online system being set up.
HMRC and the DVLA have indicated they will be issuing a consultation document on this by the end of May 2011. So if you have any views on the matter respond to the consultation.
The proposal is to have the online system in place by early 2013. The new system is expected to reduce the number of vehicles that remain permanently in the UK without registering with the DVLA or paying VAT.
Have a view on this? Leave a comment below.
Be careful where you get your VAT number
Be careful where you get your VAT number
This may sound a little odd. It seems that there are ‘businesses’ out there that are offering to get a VAT number in return for a payment: taken in advance. According to the note I received from the European Commission on this the proposals apparently appear to be official EU documents.
Of course, in the UK you can apply for a VAT number to H M Revenue & Customs for free. If you need to know whether or when you have to register in the UK you can find more information on the VAT Registration Limits page on this website.
For information on other VAT registration in other EU countries the European Commission provides information on its website.
If you have any views on this please leave a comment.
HMRC pour cold water on hot take-away food?
I wrote about this in my article Good news for hot take-away food suppliers? a few days ago after the release of the European Court of Justice’s (ECJ) decision in Manfred Bog and others. HMRC has now published a Revenue & Customs Brief which almost makes clear HMRC’s position in relation to the impact of the decision. The case was referred to the ECJ by the German tax authorities. In Germany there is a reduced rate of VAT for foodstuffs.
The question considered by the ECJ was whether the supply by the vendors from places such as mobile snack bars was a supply of goods or a supply of services. In press articles HMRC was quoted as saying they treated all supplies of food as a supply of goods. There is no mention of that in the Revenue & Customs Brief. The brief is a lot of waffle with very little substance, although it does make clear that HMRC will entertain no claims for zero-rating.
The question has to be whether UK legislation is in line with the EU legislation. Is the supply of catering services, e.g. a restaurant, a supply of foodstuffs and thus a supply of goods? Or is it a supply of services?
One thing is clear, to get HMRC to change its stance on this will require someone to take the matter to Court. I think HMRC might be wrong about the application of the zero-rate to hot take-away food being impossible – would it be an extension of the zero-rate? Or just a redefining of hot take-away food so that it falls within the zero-rating?
Have a view on this? Leave a comment: let’s start a discussion.
